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Somewhere in the city this week, a developer is staring at a term sheet that almost works. The senior lender has come in tight, the GDV looks fine, and everything should be ready to close. Except there is a hole in the middle of the deal. It is the kind of gap that used to be filled by an eager high street bank when rates were loose and appetite was looser. That bank is not coming back in the shape it took in 2021, and the sooner developers accept this the faster they will get funded.
1. The stack is a pecking order not a pie chart.
Capital stacks are often drawn as neat tidy slices, which is misleading. What you are really looking at is a queue at the bar. Senior lenders get served first, mezzanine lenders next, preferred equity gets what is left after the debt has been paid, and common equity waits at the back hoping there is enough cash behind the counter for everyone. When a project goes well, everyone drinks. When it does not, the people at the back go home thirsty.
2. Senior debt covers less of the deal than you think
Most developers walk into meetings assuming senior lenders will cover 70 percent. In 2026 that number is closer to 60 to 65 percent for anyone without a pristine track record, and even pristine track records are getting diligence harder than two years ago. Letting velocity, capex phasing and exit yields are pulled apart line by line. The days of a confident handshake funding round are over, which means the rest of the stack must work harder.
3. Mezzanine is not expensive money, it is leverage
Developers love to complain about mezzanine rates, which in the UK typically sit between 10 and 15 percent. The complaint is understandable right up until you do the return-on-equity maths. A project funded with senior debt alone might return a respectable 18 percent on equity. The same project with mezzanine layered in can return well north of 30, because every pound of mezz is a pound of equity you did not have to put in. Mezzanine is not a cost line. It is a lever.
4. Preferred equity is the new silent partner
Preferred equity has quietly become one of the most useful tools in the UK market. It sits between mezzanine and common equity, takes no security over the asset, and yet behaves a lot like debt in the sense that it expects a priority return before the developer sees a penny. What it does not do is vote on your planning decisions or tell you which contractor to hire. For developers who want leverage without losing control, it is the compromise that works.
5. The refinancing wall is here, and it is taller than advertised
A large chunk of UK real estate debt originated in 2020 and 2021 is maturing now, priced on the assumption that rates would stay low forever. They did not. The industry is moving from wait-and-see to must-transact, creating demand for stretched senior, whole loans and bridge-to-term structures. Anyone with a 2021 facility maturing in the next eighteen months should already be talking to an advisor. Not next quarter. Now.
6. Lenders have money, they just have standards
The story that nobody is lending is wrong. Banks, debt funds, challenger lenders, family offices and insurance-backed platforms all have capital deployed, and several are actively competing. What has changed is that capital is no longer generic. Each lender has a lane. Some want stabilised cash flow, some want transitional risk, some will not touch anything outside the Home Counties. A term sheet from the wrong lender is worth less than silence from the right one.
7. The numbers, in one honest table
Here is roughly where pricing and leverage sit in UK development finance at the time of writing. Every deal is different, but these figures are a reasonable place to start a conversation.
| Layer | Typical cost | Position | Leverage to |
|---|---|---|---|
| Senior Debt | SONIA + 250-400 bps | First charge | 60-65% LTGDV |
| Stretched Senior | 8-12% all-in | First charge | Up to 75% LTGDV |
| Mezzanine | 10-15% | Second charge | Up to 80% |
| Preferred Equity | 12-18% | Subordinated | Up to 90% |
| Bridge | 0.65-1.2% per month | First charge | Up to 75% LTV |
8. Packaging beats pitching, every time
Lenders rarely reject bad deals. They reject bad presentations of deals. A well-built information memorandum, a financial model that survives stress testing, a sensible cost plan and a believable exit will move a lender faster than any amount of charm over coffee. The developers who get funded in 2026 are not the ones with the best projects. They are the ones whose projects arrive on a lender’s desk already answering the questions a credit committee is going to ask.
9. Exit strategy is underwriting, not decoration
Every bridge lender in the country now treats the exit route as the single most important underwriting consideration. Rates are not going back to zero any time soon, and a bridge without a credible exit is just an expensive bet on the market. Refinance onto term debt, sale to a registered provider, block sale to a build-to-rent operator, whatever the plan is, it needs to be specific, costed and timed. A hopeful exit is not an exit. It is a problem waiting to file its accounts.
10. The advisor earns their fee at the term sheet stage
Capital in 2026 is abundant, selective and occasionally brilliant, all at the same time. Navigating it is less about knowing one lender well than knowing which five to approach, in what order, with which structure. A competent advisor saves a developer months of circular conversations and the considerable humiliation of walking into credit committee with the wrong story. The question is no longer whether debt is available. It is whether the structure on offer is the one that will let the project finish, refinance and hand a profit to the people who took the risk.
Where Unison Direct comes in
Unison Direct works with UK developers, sponsors, joint venture partners and asset managers to structure the full capital stack across bridge, senior debt, stretched senior, mezzanine and preferred equity. From the first draft of the financial model to the final drawdown, we get the structure right before it reaches credit committee. Talk to us about your next project at unisondirect.com/uk/funding-advisory-services